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In a 6-3 decision earlier today, the United States Supreme Court held that Aereo infringes broadcasters’ copyrights by providing the means for subscribers to view programs through individually-assigned antennas at about the same time they are broadcast over the air. Reversing the Second Circuit, the Supreme Court in American Broadcasting Cos., Inc. v. Aereo, Inc. held that, despite technological differences, the Aereo service performs the same function as cable systems, whose operations were expressly deemed to be “public performances” under Section 106 of the Copyright Act. The court’s opinion describes itself as applying “narrowly” to technologies that mimic the function of cable TV systems and is therefore not intended as a broad pronouncement on all forms of transmission of stored content. Indeed, while the decision holds illegal the primary Aereo service, it does not reach the question of whether Aereo infringes by offering a means to record broadcasts for viewing at a later time.

The opinion builds its analysis around the historic treatment of retransmission of copyrighted works by cable TV systems. U.S. copyright law has always given copyright owners the exclusive right of “public performance” of their works. Supreme Court decisions in 1968 and 1974, decided under the old Copyright Act of 1909, held that cable systems (then called “CATV companies”) were merely capturing signals and passing them along to ultimate users and were therefore not engaged in “public performance” of the broadcasters’ works. In response, the 1976 Copyright Act added new language providing that an entity performs publicly when it “transmits” a performance to the public. The effect was to make clear that cable systems violated the “public performance” right unless they were licensed by copyright owners to transmit their works. Section 111 of the 1976 Act set forth a complex system for compulsory licensing of copyrighted works to cable operators.

Aereo claimed that it was not engaged in public performance because it provided to each subscriber its own unique antenna which would then transmit to the subscriber’s own mobile device, solely at the direction of the subscriber. This, said Aereo, was a private performance, and not a transmission of the content “to the public.”

The Court disagreed. It found that Aereo’s activities are “substantially similar to those of the CATV companies that Congress amended the Act to reach.” In providing the service, “Aereo uses its own equipment, housed in a centralized warehouse, outside of its users’ homes.” The fact that the Aereo system remains “inert” until the subscriber activates it is not a meaningful difference from what happens when subscribers watch cable TV, said the Court; in that case, too, the subscribers select what they want to watch and when. The technological differences between the systems are “invisible” to both the subscriber and the broadcaster.

In his dissent, Justice Scalia (joined by Justices Alito and Thomas) criticized this analysis as being an imprecise “looks like cable TV” standard. In his view, Aereo does not “perform” the programs at all since it does not engage in any “volitional conduct.” It makes no choice of content; it simply provides a system that “lies dormant until a subscriber activates it.” Justice Scalia wrote that finding “guilt by resemblance” would lead to an uncertain future of case-by-case determination of whether other, similar technologies violate the public performance right.

In effect, the majority agreed that it was using a “looks like cable TV” standard by stressing that it was making a “limited holding” applicable only to systems which, like Aereo’s, imitated the function of a traditional cable system. It reiterated that the concept of public performance “does not extend to those who act as owners or possessors of the relevant product,” and stated that the majority was not ruling on whether there is infringement “when the user of the service pays primarily for something other than the transmission of copyrighted works, such as the remote storage of content.”

Justice Scalia wrote that he shared the majority’s “evident feeling” that what Aereo was doing “ought not to be allowed,” but said that “we need not distort the Copyright Act to forbid it.” He suggested that Aereo might face liability under other theories such as infringement of the reproduction right (by making copies of the programs) or secondary liability (by providing the means for users to directly infringe). But on the issue of public performance, he wrote that Aereo had done nothing more than find a loophole in the law. “It is not the role of this Court to identify and plug loopholes,” he wrote. “It is the role of good lawyers to identify and exploit them, and the role of Congress to eliminate them if it wishes.”

Prior to the decision, many were concerned that a broad ruling in favor of the broadcasters would impair the growth of new technologies for storage and distribution of copyrighted content. While content owners will certainly be encouraged by this decision, it does not appear give them much ammunition against technologies that do not replicate the function of providing real-time access to broadcast content. For example, the decision may not affect the Second Circuit’s decision in Cartoon Network LP v. CSC Holdings, 536 F.3d 121 (2d Cir. 2008), which authorized Cablevision’s use of recording devices located at its own facility but controlled entirely by users to allow them to time-shift programming. Aereo and the Second Circuit had relied heavily on this case in arguing that its real-time transmissions were equally protected. The Supreme Court rejected the analogy, but did not attack the Second Circuit decision as it applied to the facts in that case.

The decision is viewed as a victory for broadcasters and content owners, as it will preserve the current revenue models under which broadcasters earn significant revenues from cable systems’ payment of retransmission fees. But, the Court stopped well short of providing a broad reading of “public performance” that creates any direct or obvious threat to other types of digital content delivery systems.